Severstal Sells U.S. Steel Plants for $2.3B

Russia's Severstal said Monday it has agreed to sell its Dearborn and Columbus steel plants for $2.33 billion in cash.

NEW YORK (The Deal) -- Russia's Severstal said Monday, July 21, it has agreed to sell its Dearborn and Columbus steel plants for $2.33 billion in cash, exiting the U.S. just over a decade after it bought its way into the country.

Severstal, which is controlled by CEO Alexey Mordashov, will sell the Columbus, Ohio, mill to Pittsboro, Ind.-based Steel Dynamics (STLD) for $1.625 billion and its Dearborn, Mich. mill to AK Steel (AKS), of West Chester, Ohio, for $700 million.

The deals are transformational for all three companies, allowing the Russian group to exit underperforming operations at a time when the U.S. steel market remains oversupplied, while increasing the buyers' output by as much as 50%.

"We have been positioning our balance sheet and organizational structure for growth such as this," Steel Dynamics CEO Mark Millet said in a statement. "This acquisition will result in a prudent capital structure that will allow us to again return to our preferred net debt leverage of less than three times trailing Ebitda within a reasonable timeframe."

Steel Dynamics will increase its annual shipping capacity by about 40% to 11 million tons per annum and gain exposure to the oil and automotive sectors, which it expects will outpace wider steel sector growth. The company said the deal will be immediately earnings accretive and will generate an additional $30 million in pretax "earnings synergies" each year.

For AK Steel, the acquisition of the Dearborn plant secures a mill close to customers and increases its exposure to the U.S. automotive industry.